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10 l AUSTRALIAN INDUSTRY GROUP EXPORTERS GUIDE 2015--2016
ECONOMIC OUTLOOK
The March quarter gross domestic
product (GDP) fgures, which were
released in early June, showed that the
economy expanded by 0.9 per cent
in the March quarter, and by 2.3 per
cent over the year. This is well below
the RBA's view of potential growth of
3.25 per cent. The IMF, the RBA, the
Australian Treasury, and private sector
economists all predict below-trend
Australian GDP growth to continue
through the rest of 2015 (Table 3). If this
eventuates, it will be the fourth straight
calendar year of below-trend growth.
The outlook is expected to improve
in 2016 due to a strengthening
in household spending, which is
supported by low interest rates,
mild stimulus in the federal budget
and relatively strong population
growth. The long-awaited recovery
in business investment outside of the
resources sector is expected to begin
in 2016, later than the RBA's earlier
expectations, propelled by above-
average growth rates in consumption in
late 2015, together with the exchange
rate stimulus.
Looking at the sectors of the economy,
household consumption has continued
to grow at a moderate pace over the
past year, lifting by 2.6 per cent over the
year to March. Spending has averaged
around 2--2.5 per cent annual growth
in recent years -- well below the four
per cent average growth seen between
2000 and 2007. Offcial forecasters
believe that low interest rates, rising
household asset values and a fall in
the savings rate will offset weak wage
growth, and stimulate spending during
late 2015 and into 2016.
Table 3: RBA forecasts for GDP growth and consumer price infation
(Changes from last quarter highlighted in bold)
% year-ended
Dec 2014
Jun 2015
Dec 2015
Jun 2016
Dec 2016
Jun 2017
GDP (May 2015) 2.50
2.00
2.50
2.50-3.50 2.75-3.75 2.75-4.25
GDP (Feb 2015)
2.50
2.25
2.25-3.25
2.75-3.75
3.00-4.00
3.00-4.50
CPI (May 2015)
1.70
1.50
2.50
2.00-3.00 2.00-3.00 2.00-3.00
CPI (Feb 2015)
1.70
1.25
2.00-3.00
2.25-3.25
2.25-3.25
2.25-3.25
Source: RBA Statement of Monetary Policy, May 2014 and February 2015.
>> continued from page 8
The long-awaited recovery in business investment outside
of the resources sector is expected to begin in 2016